The Basics of Building Credit

How can I build good credit?

Building good credit is an important part of being an adult. Even if you never need to get a loan, you can use a good credit score to get discounts on phones, clothing, electronics, and more. There are several ways to build good credit, and one is no better than the others. You could…

– Make payments on a credit card.

– Make payments on a small loan.

– Make payments on a piece of furniture.

– Make payments on a house (not in rent).

You get the idea. Everything revolves around paying someone for something. In order to build credit, you have to find people that will trust you with a small amount of money. If you pay that back on time, you will get a good mark and a higher score.

It’s still like school.

Let’s go back to the idea of getting grades in class. If you turn in your assignments on time with the right information, you will get a good grade. Late or incomplete homework will not have as high of a grade. It works the same with credit. If you don’t make a payment on time or you make less of a payment than you need to, your credit score will not be as high. It’s as simple as that.

It takes credit to make credit.

Before you get excited about all of this, remember that you need credit to make credit. Sadly, most places that will help you build your credit want to see examples of your credit from the past. If you have no score to show them, you might not get the opportunity you need.

When you first try to build your credit score, you will need to get small credit cards and loans from companies that don’t look at past credit. These credit cards and loans will not be worth much, but they will give you a chance to get started. You may also get credit by paying on your household bills, like your cable, internet, electricity, and water. You will have to have those anyway, so they will help slowly improve your credit score.

You can also work with someone called a cosigner if you apply for a loan. This is a person that already has credit and is willing to put his or her name on a loan for you. By cosigning with you, this person is telling the bank that he or she will take over your payments if you stop making them. Your cosigner could be a parent, a grandparent, a friend, or anyone that you know with a steady income and a good credit score.

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*Advertiser Disclosure:CompareCards is an independent, advertising-supported credit comparison service. Offers which appear on CompareCards.com are from companies with which CompareCards.com receives compensation. This compensation may impact the location and order in which these products appear. CompareCards.com takes into consideration several proprietary rules and the likelihood of an applicants’ credit approval to determine how and where products appear on the site. CompareCards.com does not include the entire universe of available credit or financial offers.

ADVERTISER DISCLOSURE

CompareCards is an independent, advertising-supported credit comparison service. Offers which appear on CompareCards.com are from companies with which CompareCards.com receives compensation. This compensation may impact the location and order in which these products appear. CompareCards.com takes into consideration several proprietary rules and the likelihood of an applicants’ credit approval to determine how and where products appear on the site. CompareCards.com does not include the entire universe of available credit or financial offers.

About Our Ratings

Our editors rate credit cards objectively based on the features the credit card offers consumers, the fees and interest rates, and how a credit card compares with other cards in its category. The ratings are the expert opinion of our editors, and not influenced by any remuneration this site receives from card issuers.

Excellent Credit

700 or Higher

Credit cards for excellent credit are intended for those with a credit score of 700 or Higher.

Good Credit

700 or Higher

Credit cards for excellent credit are intended for those with a credit score of 700 or Higher.

Fair Credit

Between 600 - 659

Credit cards for fair credit are intended for those with a credit score between 600 - 659.

Bad Credit

599 or Lower

Credit cards for bad credit are intended for those with a credit score of 599 or Lower.

No/Limited Credit

- - -

Credit cards for no credit are intended for those without an established credit score.